The Australian taxation system and the Henry report

Vanguard March 2011 p. 6
Alex M.

One of the characteristics of the taxation system in Australia is its complexity. According to an Australian School of Taxation (ATAX) overview of the Henry report we have in this country “over 100 separate taxes, [as well as] some of the lengthiest and most illegible tax legislation known to man …”

In 2008 the Rudd government appointed Dr Ken Henry to oversee a review of the taxation system. The Review of Australia’s Future Tax System, to give it its official title, was meant to provide recommendations for the simplification of the Australian taxation system. That was not all it was charged with doing. As its title suggests, the development of Australia’s taxation system for the foreseeable future was a major part of the report.

Previous review in 1972
The last major review of taxation in Australia was undertaken by Ken Asprey, a retired NSW Supreme Court judge appointed by the McMahon Liberal government in 1972, Asprey’s report was handed to Whitlam’s government in 1975. The first response was to shelve it, ignoring the recommendations. However, over the next twenty-five years all its recommendations were implemented. The last recommendation implemented being the GST, which was ushered in by the Howard government in 2000. If the Asprey review is anything to go by, then the Henry report will form the basis of ongoing tax changes.

A history of taxation in Australia
Whilst a brief survey of the history of taxation in this country may not be the most thrilling of prospects, it does put the Henry report in context and provide some insight into how tax policy has been and still is shaped by class interests.

The colony of New South Wales was the site of the first duties levied on beer, wine and spirits, along with wharfage fees. The year was 1805. This revenue was earmarked for the building of a gaol and orphanage in Sydney. Interestingly, the colonial authorities applied duties on consumption items rather than attempting to apply taxes on property. As the Australian Marxist, Steve Gibson, has pointed out: “During the first 50 years of taxation in Australia, the main feature of taxation was the broadening and extension of the base of excise and customs forms of taxes”

It was not until the advent of the First World War that duties like customs and excise were supplanted by other taxes as the mainstay of taxation in this country.

The first attempt to apply land tax in order to split up large landholdings came about in 1877 in Victoria, almost a century after the arrival of Arthur Phillip. Three years later, Tasmania introduced what is considered to be the forerunner to income tax, with the imposition of withholding tax on dividends, annuities and rents in 1880. Over the next 15 years in the states of Tasmania, South Australia, Victoria and New South Wales general income tax regimes were introduced, with all Australian states having introduced general income tax by 1907.

Commonwealth taxes
Federation in 1901 added another layer of government to the Australian political landscape, a layer that required its own revenue streams. The Australian Constitution gave the Commonwealth parallel power with the states to levy taxes (section 51(ii)). Section 90 of the Constitution gave the Commonwealth the exclusive power to impose customs and excise duties. Section 88 established a uniform national tariff, administered by the Commonwealth. Of the revenue raised by the Commonwealth, one quarter went into its coffers with the remainder distributed to the states.

Income tax collection
Two World Wars provided the impetus for many new taxes. More importantly, the sole responsibility for the collection of income tax was assumed by the Curtin government in 1942, to help fund the war effort. To sweeten the deal, states were able to continue payroll and land taxes, stamp duties and sundry licence fees, as well as continuing to receive a distribution of revenue deemed surplus to Commonwealth requirements.

The main elements of Australia’s tax structure can be said to have been put in place with this war time initiative. It would take the implementation of some of the recommendations of the Asprey report from the 1980s on, for the structure to be substantially altered.

Class aspects of taxation
Steve Gibson, in a 1999 article, argued that the preferred form of taxation for the Australian ruling classes has been levies on consumption. This is known as indirect taxation.

By way of contrast, a prime example of direct taxation is income tax. Another is land tax. Land taxes have not been popular, causing anguish to various members of the landed elites in Australia. Consequently, they have been opposed at various times throughout the history of European settlement in Australia. It has long been apparent that “the wealthy in this country have always used each and every means at their disposal to block any and all measures designed to ensure that they pay any, let alone their “fair share”, of the taxes necessary to pay for commonly used infrastructure and services …”

Workers pay the lion’s share
This is the context for the reviews of the Australian taxation system and the revolt against the mining super-profits tax.

Governments try to maximise their revenues in order to provide services and infrastructure, amongst other things, operating within certain constraints. These constraints being that under capitalist conditions, ruling class elements such as those in the mining industry like ‘Twiggy’ Forrest of Fortescue Metals Group and Clive Palmer will act to minimise personal and corporate taxes.

Woe betides any bourgeois government that gets its wires crossed on these serious matters. As we have seen, Rudd paid the price for cherry-picking one of the Henry report’s recommendations in an effort to return the Commonwealth budget to surplus.

It may well be that Australia’ taxation system is complex and is in need of review. Clearly though, under prevailing capitalist conditions and with the bourgeoisie firmly in control of the state, it will be the working people and those that can ill-afford it who will continue to pay the lion’s share of Australia’s taxes. Such a situation is unjust and inequitable; it is time to make the rich pay!

Taxation – exploitation by the state
In Origin of the Family, Private Property and the State, Frederick Engels described the state apparatus is “a power seemingly standing above society”. The state exists to moderate the irreconcilable conflicts between the competing classes, so that the continuing rule of the dominant class is not disturbed. To do this, the state maintains a standing army, police, courts, bureaucracy etc. as well as providing the infrastructure and basic services (health, education and meagre welfare) to keep the system going. Taxation is the primary means by which the large costs of running the state apparatus are spread across the whole of society.

In Australia, the state serves the interests of the dominant section of capitalists; the US, European and Japanese multinationals. The taxation system assists this. At their demand, services to the people are cut back and huge tax concessions are granted for their projects aimed at taking over or wiping out Australian industries.

While the capitalist (and foreign multinational) can pay taxes out of the profits delivered from the surplus value created by others, the worker has only “rainy day” money to call on. When the worker’s taxes are handed over, or taken beforehand as PAYE tax, the worker is in fact parting with a concession that was forced from an individual capitalist. The concession is then returned to the capitalist class as a whole, since the state exists and operates for the benefit of the ruling class of capitalists.

This ruling class uses its control and influence of government legislation to enforce methods of pushing the main burden of taxation onto the workers and their families. Some of main ones are income tax, sales tax and petrol excise. All sorts of devices and legalities are invoked to reduce the taxation burden on the capitalists. A whole industry of taxation lawyers exists to minimise the taxation problems of the rich!